Pricey dollar sparks trouble for startups
As Pakistan grapples with persistent rupee depreciation against the US dollar, companies running businesses in the country have started optimising their expenses by switching over from dollar to rupee.
Economists argue that when challenges mount, entrepreneurs and individuals begin contemplating how to beat hard times and get out of trouble.
Pakistani rupee has depreciated massively in the past couple of years, reaching around Rs283 to a dollar and making life miserable for businesses as well as individuals.
Similarly, the country’s economic woes have deepened in the face of the devastating floods of 2022, lack of export and tax revenue growth, dwindling foreign currency reserves and global economic uncertainty.
In an interview with The Express Tribune, Foodpanda CEO Muntaqa Peracha said as the economy was struggling, they had also been impacted by the difficult circumstances.
Although they are growing in rupee terms, when seen in the context of dollar they are on a downward trajectory, which sparks challenges for their Berlin-based parent company, Delivery Hero.
Hero acquired Foodpanda for $500 million in 2016, according to the available information.
“To tackle the situation, we have started optimising our expenses by shifting from the greenback to Pakistani rupee,” the CEO remarked.
For example, earlier expenses were made in dollar for marketing campaigns, but now “they are making these payments in rupee,” he said.
Foodpanda, a startup that targeted to make profit by 2023, has not met the goal so far, however, according to the CEO, the company is well on track and will announce profit sometime this year.
Many startups in Pakistan such as Airlift have shut down over the past two years owing to the impact of Covid-19 pandemic and economic meltdown. On the contrary, the likes of Foodpanda are relying on the country’s huge and growing population to advance their operations.
“Grocery and food is not luxury at all, so people will keep ordering them,” the CEO said.
The origins of Foodpanda’s current platform can be traced back to 2011 when Nauman Sikandar Mirza established an online food review platform named Food Connection Pakistan. In 2013, Mirza and his team raised $250,000, which enabled them to launch EatOye. In 2015, Foodpanda took notice of EatOye and acquired it, further solidifying its presence in Pakistan. Mirza remained CEO of the merged company until early 2022.
Digital companies are helping Pakistan transform its economy from the brick-and-mortar model to a freelance market, termed gig economy, where “every single transaction is tax-paid,” Peracha said.
Foodpanda boasts that the secret of their success lies in working with the government. On one side, the government gets jobs for its population while on the other the company is facilitated via policy and tax concessions such as tax discounts for home-based shops, predominantly run by women.
Private companies complement the government in areas where it is not feasible for the state to provide services directly.
Foodpanda is mulling over entering the export business after its recent experiment of delivering four containers of fresh vegetables to the United Arab Emirates (UAE) in a joint venture with Talabat, another subsidiary of Delivery Hero.
Now, it is considering making inroads into poultry and grocery export markets in association with Middle Eastern players.
“It is one of the options being studied to scale up operations,” the CEO said. “We are starting from the Middle East because it is closer and easier.”
Exports will not only help the company reach fast its profitability goal but will also help the country earn foreign exchange.